The last three and a half months has seen one of Kenya’s greatest rollercoaster thrills. Contrary to popular perception, it’s not about politics for once. It is the twists and turns that the Kenyan shilling has gone through within this period. The period between December 2010 and mid-April 2011 has seen policy-makers, industry regulators, investment analysts and even the common mwananchi all scratch their heads as they seek to find a solution to the issue.
Tracking the shilling’s performance in the forex markets against leading foreign currencies, one wouldn’t need to write a script for a soap opera saga featuring the Kenyan shilling’s love-hate relationship at the money markets. The staggering changes that the shilling has had over this period are one that would pass for basis of a thesis for a research paper.
When measured against the US Dollar, the shilling has definitely seen it all during this period. According to data from The Central Bank of Kenya’s website, the shilling was trading at a mean rate of Kshs 80.89 against the US dollar on December 1st 2010. This is Kshs 4 lower that the rate at which the shilling was exchanging hands with the dollar as at 15th April 2011. Market forces didn’t seem to rectify the situation and this saw CBK step into play.
The Central Bank’s action to have a thorough check up on forex bureaus and commercial banks to curb the speculation about Kenya’s reported dwindling foreign reserves was a timely and an effective move. This was evident when the shilling was at it’s lowest against the US dollar trading at Kshs 86.32 by March 15th 2011 after which the shilling started stabilizing against major foreign currencies.
The fluctuating exchange rates hurt importers pockets given the high rates of exchange but it was welcome news especially for the agricultural sector. Monthly data from the Kenya national bureau of statistics for the period starting December 2010 to March 2011 for example indicated that tea exporters laughed all the way to the bank as they traded a kilo of tea at a price range of $2.94 to $3.07 in March. This is proof enough that the agricultural export sector made returns during this period.
Whereas the CBK governor and his team of experts were having it rough, exporters in the agriculture sector wished the shilling would slip further. Maybe to a hundred.
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